INSTANT VIEW: Bernanke warns of systemic risk

NEW YORK (Reuters) - Restoring financial market stability is a top priority for the Federal Reserve as a weakening housing market, tighter credit and rising oil prices threaten the economy, Fed Chairman Ben Bernanke said on Tuesday.

Financial markets and institutions remain under "considerable stress," Bernanke said.

His comments come just two days after the Treasury Department, in close coordination with the Federal Reserve, announced measures to aid mortgage finance companies Fannie Mae and Freddie Mac, which have been under pressure as the housing market deteriorated.

In its semi-annual monetary policy report to Congress, the Fed raised its projection for growth in 2008 to a range of 1.0 percent to 1.6 percent from a 0.3 percent to 1.2 percent range it forecast in April on expectations for stronger consumer spending.

In the face of costlier energy, the U.S. central bank also raised its inflation forecast to a range of 3.8 percent to 4.2 percent, up substantially from its previous 3.1 percent to 3.4 percent projection.

COMMENTS:

SUBODH KUMAR, CHIEF INVESTMENT STRATEGIST, SUBODH KUMAR &

ASSOCIATES, TORONTO, CANADA:

"I think Bernanke has been realistic, but I think the issue is that the market expectations, including earnings and perhaps credit, have been somewhat unrealistic, so all the recalibration of the market has happened in a very short period.

I think that the market are now entering a territory which should be quite interesting for value-oriented investors. We are now below the 1,215 level for the S&P, you are entering into an area where value-oriented will be looking closely."

ROBERT MACINTOSH, CHIEF ECONOMIST, EATON VANCE CORP,

BOSTON:

"Bernanke is changing his tune a little bit, he has become more worried about economy than he was before. I wish I could say this is the end of the angst, but I would have said that already about 10 times along the way here. There is probably more room for upside in Treasures, if the economy is as weak as it is, or as weak as it may become -- there is (more room for price upside). No one knows where it is going to end for stocks, talk about a negative tone, no matter what anybody says or does it seems to get worse."

GEORGE ADELL, FIXED INCOME STRATEGIST, COMMERCE CAPITAL

MARKETS, JUPITER, FLORIDA:

"Nothing has really changed for the Fed. The downtick in the economy continues and inflation has intensified on the upside. It has tied the Fed's hands from a policy perspective. They can't do anything because the numbers have been coming in mixed."